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"Rising equity prices have failed to lift investor gloom and we still see a quarter of investors expecting a global recession while hopes for further policy easing have been delayed"

Investor confidence has weakened further, led by a sharp decline in
expectations of corporate profit growth, according to the BofA Merrill
Lynch Survey of Fund Managers for July.

BofA Merrill Lynch’s Growth Expectations Composite has fallen to 37 in
July from 43 in June and 54 in May. A severely deteriorating outlook for
profits is driving the fall in confidence. A net 38 percent of investors
say corporate profits will worsen in the coming 12 months – compared
with a net 19 percent a month ago. It represents a 39 percentage point
drop since May. The two-month drop is similar to the fall in confidence
in summer 2011 as the sovereign debt crisis took shape.

Belief that corporates can grow profits by 10 percent or more is at its
lowest point since April 2009. A net 69 percent of the panel expects
corporates profit growth to be less than 10 percent in the coming year.
A net 58 percent says operating margins will decrease, up from a net 41
percent in June.

Both the broader macro-economic outlook and risk appetite have
stabilized, however, after two months of sharp deterioration. A net 13
percent of the panel says that the world economy will weaken in the
coming year, a drop of two percentage points after a fall of 26 points
from May to June. BofA Merrill Lynch’s Composite Indicator for Risk and
Liquidity rose slightly month-on-month as investors reduced average cash
holdings in portfolios to under 5 percent. Most investors expect further
quantitative easing, but few expect this to happen in the third quarter.

“July’s survey highlights that corporate profit expectations have to
catch up with the downgrade in the economic outlook we have seen the
past two months,” said Gary Baker, head of European Equities strategy at
BofA Merrill Lynch Global Research. “Rising equity prices have failed to
lift investor gloom and we still see a quarter of investors expecting a
global recession while hopes for further policy easing have been
delayed,” said Michael Hartnett, chief Global Equity strategist at BofA
Merrill Lynch Global Research.

Eurozone concerns spread to core economies

Investors’ perception of risk in the eurozone has shifted this month
with fears falling about the periphery but rising about Europe’s core.
The proportion of respondents who see the risk of a negative shock
around Germany’s economy has more than tripled to 32 percent, up from 10
percent in June. Concern about France has risen with a majority of
investors (55 percent) believing the French economy could present a
negative surprise this year.

Fears that Spain or Portugal could spring a negative surprise have
fallen, while expectation of good news from Ireland is growing – 32
percent of investors hope for a positive surprise from Ireland this
year, up from 16 percent in June. Confidence in Greece has fallen,
however. The proportion saying Greece will avoid exiting the euro fell
to 37 percent from 44 percent.

European investors see an increasing risk of recession and also concur
with rising worldwide concerns about corporate profits. A net 61 percent
of European Regional Survey panelists predict worsening corporate
earnings, double June’s reading.

Is the technology bubble bursting?

Technology has been a favorite sector for global investors for the past
three years, but U.S. investors have signaled a possible bursting of the
IT bubble. Overall, a net 22 percent of U.S. respondents to the Regional
Survey are overweight technology – a sharp fall from a net 41 percent a
month ago. Within those figures, 19 percent of the panel are underweight
IT, up from 9 percent in June.

Global investors have also scaled back Technology holdings. A net 32
percent is overweight technology this month, down from a net 41 percent
in June.

U.S. equities have declined in popularity as global asset allocators
have cast their net around the world. A net 14 percent of respondents
are overweight U.S. equities, down from a net 31 percent last month. At
the same time, asset allocators have reduced their underweights in
eurozone, U.K. and Japanese equities.

Oil and gold valuation verdicts intrigue

Despite commodities as an asset class losing popularity this month,
investors see gold as fairly valued and oil as undervalued. The
proportion of panelists saying gold is overvalued fell from 10 percent
to 1 percent. A net 12 percent say that oil is undervalued, compared
with it being viewed as fairly valued in June. The last time gold was
seen as fairly valued was when it was priced at about $1,000 per ounce.
The last time oil was seen as undervalued preceded a surge in the oil
price.

Survey of Fund Managers

An overall total of 261 panelists with US$708 billion of assets under
management participated in the survey from 6 July to 12 July. A total of
190 managers, managing US$567 billion, participated in the global
survey. A total of 145 managers, managing US$323 billion, participated
in the regional surveys. The survey was conducted by BofA Merrill Lynch
Research with the help of market research company TNS. Through its
international network in more than 50 countries, TNS provides market
information services in over 80 countries to national and multi-national
organizations. It is ranked as the fourth-largest market information
group in the world.

BofA Merrill Lynch Global Research

The BofA Merrill Lynch Global Research franchise covers more than 3,300
stocks and 880 credits globally and ranks in the top tier in many
external surveys. Most recently, the group was named Top Global Research
Firm of 2011 by Institutional Investor magazine; No. 1 in the 2012
Institutional Investor All-Asia survey for the second consecutive year;
and No. 2 in the 2012 Institutional Investor All-China, All-Europe and
All-Japan surveys. The group was also named No. 2 in the inaugural 2012
Institutional Investor Emerging Markets Equity and Fixed Income survey,
covering Emerging Europe, Middle East and Africa; No. 2 in the 2011
All-Latin America and All-America Equity team surveys; and No. 3 in the
2011 Institutional Investor All-America Fixed Income and All-Brazil
Research team surveys.

Additionally, BofA Merrill Lynch Global Research was named the No. 1
Global Broker by Financial Times/StarMine, as well as ranking No. 1 in
the U.S. and Europe and No. 2 in Asia. The group was also named No. 1 in
Asia and No. 2 in the U.S. in the Wall Street Journal Best on the Street
2012 Analysts Surveys. The group was also the winner of the Emerging
Markets magazine’s EM Research Global Award for 2010 and 2011.

Bank of America

Bank of America is one of the world's largest financial institutions,
serving individual consumers, small- and middle-market businesses and
large corporations with a full range of banking, investing, asset
management and other financial and risk management products and
services. The company provides unmatched convenience in the United
States, serving approximately 57 million consumer and small business
relationships with approximately 5,700 retail banking offices and
approximately 17,250 ATMs and award-winning online banking with 30
million active users. Bank of America is among the world's leading
wealth management companies and is a global leader in corporate and
investment banking and trading across a broad range of asset classes,
serving corporations, governments, institutions and individuals around
the world. Bank of America offers industry-leading support to
approximately 4 million small business owners through a suite of
innovative, easy-to-use online products and services. The company serves
clients through operations in more than 40 countries. Bank of America
Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial
Average and is listed on the New York Stock Exchange.

Bank of America Merrill Lynch is the marketing name for the global
banking and global markets businesses of Bank of America Corporation.
Lending, derivatives, and other commercial banking activities are
performed globally by banking affiliates of Bank of America Corporation,
including Bank of America, N.A., member FDIC. Securities, strategic
advisory, and other investment banking activities are performed globally
by investment banking affiliates of Bank of America Corporation
(“Investment Banking Affiliates”), including, in the United States,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, which is a
registered broker-dealer and a member of FINRA and SIPC, and, in other
jurisdictions, locally registered entities. Investment products offered
by Investment Banking Affiliates: Are Not FDIC Insured * May Lose Value
* Are Not Bank Guaranteed.